Let’s start this by congratulating our local elected representatives, most of whom won fairly decisive victories in the primary election yesterday. For others, the real work starts today heading into the general election. I think it’s safe to say that after the sensory overload we’ve all experienced the past few weeks, we’re looking forward to a brief respite from the assault. Best of luck to the candidates I support.
I’d also like to thank City Managers Aaron Adams (Temecula), Grant Yates (Lake Elsinore), Gary Nordquist (Wildomar), Armando Villa (Menifee) and ACM Ivan Holler (Murrieta) for making our 8th Breakfast with the City Managers a huge success again. Our members turned out in record numbers to hear about what’s happening in our marketplace with housing, infrastructure, public safety and education. Realtors® are your ambassadors to the community and prospective residents and your information is invaluable to us. We appreciate your time.
Now on to real estate things. Since the housing market began to turn around in earnest back in the 2013 timeframe, the market has been characterized by a low level of inventory. In fact, the dearth of supply underlies many of the challenges in California’s current housing environment. The supply shortage has caused home prices to rise much faster than incomes, which has led to a deterioration in affordability and an erosion of homeownership. At the same time, California’s economy continues to pump out good jobs across the spectrum of wage and skill categories and indeed, across every geographic area in the state. In fact, according to the Bureau of Labor Statistics, Riverside County has ranked 5th in the top 10 US cities for job growth during the past three years! This growth in demand has come into direct conflict with the shortage of homes with competition for homes meaning they sell quickly for a premium and typically go to the highest bidder.
However, there are some initial signs of optimism as we enter the busy homebuying season. I am always reluctant to label something as a trend based on a relatively short timeframe, but for the first time in nearly 3 years, California has seen an increase in the number of active listings on the market. Overall, there was a 2% increase in the number of homes available for sale in April. Locally it’s been even stronger. Our inventory of homes for sale increased 10% month-over-month. Resale home inventory has increased every month for the past 7 months, up 30% since January (1,565 – 2,203) bringing it to its highest level since September 2016.
That is encouraging but again, has to be placed in context.
Across the region there is still just a 2.3 month supply with Menifee at 1.8 months, Murrieta and Lake Elsinore at 1.4 months and Temecula with just 1.2 months inventory in May. We’re not out of the woods yet by any stretch. And the increase in inventory can also be partially attributed to the fact that sales are slow. While month-over-month sales were up 8% (987 – 1,074), they were off 13% year-over-year (1,229) and down 7% year-to-date (4,317 – 4,626). Last year June was our peak sales month, but pending sales flat coming into June. We’re going to have to do better than that if we’re going to make up the deficit. If I had to guess right now, I’d say sales are going to be back to 2016 levels this year, but there’s still a lot of time twixt now and December. If all of you could do your part and buy a home in the next few months that would be greatly appreciated.
Of course, it doesn’t matter much how sales are going because prices continue to ratchet upward regardless. Nominally median price was down ever so slightly month-over-month ($376,833 – $375,000), but when we weight out a $70,000 swing in Canyon Lake, prices were actually up about 2% across the rest of the region. Year-over-year our median is holding steady up 7% ($350,500 – $375,000).
Slower sales and increasing inventory might slow price escalation some through year-end, and in fact some prognosticators are forecasting that, but I’m not seeing that in our local market. Because while our local cities continue to encourage development, approve projects and add new housing units, those units are typically priced 10% or more higher than comparable existing resale units, keeping the market moving inexorably upward. There is little relief in sight for 1st time buyers or affordable workforce housing.
Supply = Solution.